K-line reversal pattern first lesson
[Head and Shoulders]
Head and Shoulders is a classic reversal pattern, and other reversal patterns are mostly variations of head and shoulders. When a head and shoulders is formed, it usually forms a left shoulder in the strongest upward trend, and then rises again to form a head after a small correction, and then rises again to form a right shoulder after another correction, thus forming the simplest head and shoulders pattern. The schematic diagram of the head and shoulders pattern is shown in the figure
The formation principle of the head and shoulders pattern: when the price is pushed up to the left shoulder, the trading volume increases sharply; then, due to the need for profit-taking, the price begins to adjust downward, but because the market outlook is still optimistic, it only falls in a reduced volume; then, the price begins to continue to rise under the encouragement of good news, and the trading volume is still considerable; but when it approaches the head, the trading volume will shrink and decrease, which is a manifestation of insufficient buying, so the head appears; thereafter, there are differences of opinion in the market, but due to insufficient bullish power, the price begins to fall back to the neckline, and the trading volume at this time is often decreasing;
When the price reaches the neckline, some optimistic investors Investors in the future continued to buy, but some investors suspected that the head had been formed, so the number of optimistic investors began to decrease, and the right shoulder appeared when the price was unable to maintain a high level; then the price began to pull back, and when it fell to the neckline, it began to break through with volume; because some investors suspected that it was a false breakthrough, there might be a short rebound in the future, causing the price to pull back to the neckline; when the price after the pullback failed to stand above the neckline, the neckline changed from a support line to a resistance line, and the classic head and shoulders top pattern was fully revealed, and the price began to fall continuously with volume (it can also fall without volume, when there is no panic selling in the market, the market will naturally fall back due to insufficient buying)
